Consumer Goods Council of South Africa panellists renew call for specialised unit to fight illicit trade

South Africa needs a specialised, independent and well-resourced body to investigate illicit trading. The call was made at a panel discussion hosted by the Consumer Goods Council of South Africa on Thursday. 

Judge Dennis Davis, chairperson of the Davis Tax Committee, said the number of reports he received about illicit trading was enough to convince him that the National Prosecuting Authority (NPA) was unable to deal with such crimes on its own. 

The Davis Tax Committee assesses the country’s tax policy framework. 

“Not a day goes by without me getting a call from one or other industry telling me that to a large degree their businesses are being vitally affected by illegal trade coming into the country in circumstances where no taxes are paid and no customs are paid, so the illegal component takes over from the legal component,” said Davis. 

“I am sure that the National Prosecuting Authority on its own is unable to deal with this because you can’t ask them to deal with all the state capture cases and on the other hand try to make a very significant headway in illicit trading.” 

The NPA derives its mandate from section 179 of the Constitution, which empowers the prosecuting authority to institute criminal proceedings on behalf of the state. 

“The Hawks recently reported that they have 48% vacancies to be filled. Government is losing revenue, it’s losing excisable tax due to goods that are brought into the market illegally,” Davis said. 

On Tuesday, the Directorate for Priority Crime Investigation (Hawks) said the unit was operating at only 52% capacity and about 1 500 posts still needed to be filled.

Davis said a reconstitution of something similar to the Scorpions, which focused on illicit trade, was vital.  “The Hawks being understaffed is unconscionable. When it comes to syndicated organised crime we want a specialised integrated NPA that can start operations like we used to have so we can have better results and we should throw as much money as is required in order to get the right people.  

“Unless there is the political will to curb rent seeking and to essentially attack head on [illicit trading], I really worry that the illicit economy will just continue to overwhelm the society,” Davis said. 

Mark Shaw, of the Global Initiative Against Transnational Organised Crime, agreed with Davis, saying there was a need for a well resourced, specialised and independent investigative body. 

“The Hawks are doing good work but I would say they are under-resourced. I would also raise issues around their independence with how they are structured. Essentially, a lot of what we are doing is reactive until we shift to a more proactive mode, I think we will struggle to respond properly,” Shaw said. 

The Hawks target organised and economic crime, corruption, and other serious crime referred by the president or another division of the South African Police Service.

It is impossible to quantify the exact costs of illicit trade to the economy but according to the Global Financial Intelligence (GFI) report of 2019, South Africa loses about R152 billion a year from illicit economic activity. 

Carina Bruwer, a senior researcher at the Institute for Security Studies, said South Africa also needed to work with other countries. 

“A lot of the commodities mentioned today are traded internationally and they are very much part of international organised crime. It’s important for South Africa to start cooperating with other world regions where these commodities are either coming from or moving through.” Bruwer said. 

For illicit cigarettes for example, the largest share of that market was occupied by those manufactured locally, with other brands smuggled in from neighbouring countries such as Mozambique and Zimbabwe making up the rest, according to the Institute for Security Studies. 

“I think it is important to not necessarily just focus on sorting things out in South Africa, but making sure we have the international relationship [so] that we can cooperate with other countries that are fighting illegal trade,” Bruwer said.